Individual Investor

Institutional Investor

A Word and a Handshake

Aug 1, 2017

Did you grow up in small community, a close-knit town or (if you can remember it) before the internet was a factor? Back then a word and a handshake were stronger than any contract or service agreement. “Trust me” was as good as gold and if you failed at what you had promised, you did everything in your power to correct your mistake. The future of your business depended on the power of keeping that relationship and doing what was right. As I reminisce about the simpler times, I can’t help but wish that ‘trust’ was as prevalent now as it was in the past.

As a husband and father, I always want to make sure my family is protected. In a similar way, a business owner sponsoring a qualified retirement plan is obligated as a fiduciary to put the interest of their employees ahead of themselves. For those that have been in the retirement industry since the enactment of ERISA, you have seen many changes. Some of those stemmed from lawsuits, some from poor results, others from a failure in fiduciary responsibility by employers, advisors/brokers or retirement plan providers. Most of the unintended issues occurred when investment companies (retail, insurance, banks & trust companies) wanted market share for their own proprietary funds. There was little communication to employers on their true “fiduciary responsibilities.” The markets were running high, there was very little clarity on how to manage a 401k plan, there were few lawsuits and there was also limited direction for the management of investments and assets within qualified plans. Many brokers/advisors were enticed by these companies with a 2% or 3% upfront bonus to move retirement plan assets (which almost always went into those company’s proprietary funds). It was a gold rush in the retirement plan industry, but did the right party benefit?

Fast forward the clock 30 years…

We now have further clarity on managing a 401k plan and examples of what not to do as lawsuits pepper the market. ERISA fiduciary services are a core topic of discussion, DOL/IRS audits are frequent and the added pressure of the 401k plan account being the greatest retirement asset for most individuals. So, what does this mean? Employers are more exposed to fiduciary risk than ever before and are being held to the highest standard on making sure they meet their obligations as the ‘Named Fiduciary’ of the plan. A considerable number of employers are generally unware of their fiduciary responsibilities and subsequent liabilities, in some cases, until it is too late. Many believe their retirement provider and/or advisor are taking on most, if not all of that responsibility without understanding that neither of them act as a fiduciary or are named as a fiduciary.

Most providers are not failing in their delivery of services to the plan. They are, however, failing to clearly communicate what they are not doing for the plan. They are also not elaborating on the full scope of responsibilities employers hold as the ‘Named Fiduciary.’ Oftentimes, information regarding their fiduciary status is buried deep into their service provider contracts.

So how can employers put trust back into the equation with service providers? How can they have confidence that those providers are looking out for their best interest? Employers should require that their providers have some or all of the following:

Independent validations & certifications (i.e. CEFEX)

Regular audits of business operations with transparency in the results

Benchmarking reports on their fees for services as being reasonable

Regular client reviews of overall plan outcomes

Analysis of participant outcomes and plans to improve success rates

At Unified Trust, we believe that trust must be the foundation of everything we do. This is why we’ve accepted fiduciary status from the beginning. As a nationally chartered trust company and discretionary trustee, we provide the highest level of fiduciary oversight under ERISA. We are named in the plan document (something you seldom see) with broad fiduciary responsibility. We were among the first organizations globally and the first trust company to receive a Centre for Fiduciary Excellence (CEFEX) certification. This certification is renewed annually to ensure continuous fiduciary excellence.

We understand the importance trust plays in improving outcomes and we know that our success comes from our fiduciary responsibility to always put the interests of our clients first.

Simply put: saying you are a fiduciary is a commodity; doing it is a rarity.

For more information on Unified Trust and our services, please contact our Advisor Services group at 866-296-6682.

Products and services offered by Unified Trust Company, N.A. are not insured by the FDIC, are not a deposit or other obligation of, or guaranteed by, Unified Trust Company, N.A., and are subject to investment risks, including possible loss of the principal amount invested.